Box.com co-founder and CEO Aaron Levie published a terrific piece last night outlining the thesis that enterprise software is on the path to being a trillion dollar market.
His argument is basically an extension of what Marc Andreessen laid out years ago in his famous Wall Street Journal op-ed from 2011: software is “eating” the world.
The argument goes something like this: businesses exist to solve problems and create value for customers. Digital technologies present new and better ways to solve these problems than most of the analog approaches of the past because software-based solutions are (1) massively scalable, (2) can be delivered via the internet at virtually zero marginal cost, and (3) leverage data rather than biases or ignorance to form decisions.
As a result, software companies are gobbling up much of the value chain from the plates of incumbents. Blockbuster was killed by Netflix, a software company. Countless travel agencies have folded thanks to the ease of online reservations and comparison shopping through web portals. Google has consumed the print classified ad business.
Thus, when sizing the opportunity for software companies, it’s actually hard to set any sort of ceiling on the potential (other than global GDP I suppose) because history has shown repeatedly that even industries or businesses that never considered themselves “technology” companies could be vulnerable to new digital-based ways of solving customer problems.